St Casimirs Mortgage Minute

TransUnion: Rate Hike Could Cause Payment Shock for 9M Borrowers

A new report from TransUnion indicates that an interest-rate hike of 25 basis points by the Federal Reserve would result in 92 million credit-active consumers experiencing a monthly payment increase, but the average increase would be just $6.45 per month. However, 9.3 million consumers would not be able to absorb the increase. "While it's important to address the 9.3 million consumers who cannot absorb the payment shock, 90 percent of exposed consumers can afford their increased monthly payments," said Nidhi Verma, senior director of research and consulting at TransUnion. "However, if interest rates continue to rise progressively, more consumers might not be able to absorb the payment shock." Borrowers with one or more variable-rate credit products, including credit cards, home equity lines of credit, or certain mortgages and personal loans, are among those at risk. According to Verma, "In theory, 137 million consumers could be exposed to a payment shock, but in fact not all of these consumers will be impacted." Varma noted that some consumers pay their balances in full each month, or their annual percentage rates cannot be further increased.

From "TransUnion: Rate Hike Could Cause Payment Shock for 9M Borrowers"
HousingWire (09/21/16) Ramírez, Kelsey

Mortgage Applications Tank 7.3 Percent Amid Rising Rates

The Mortgage Bankers Association (MBA) reported on Sept. 21 that total mortgage application volume fell 7.3 percent on a seasonally adjusted basis last week from the previous week. Refinance applications fell 8 percent to the lowest level since June, though refinance volume remains 26 percent higher than the same week last year. "Mortgage rates increased to their highest level since June last week as comments by some Fed officials made it appear that the Federal Reserve is closer to raising rates," said MBA chief economist Michael Fratantoni. "The average refi loan size fell to its lowest level in three months as more jumbo borrowers left the market." Meanwhile, purchase application volume dropped 7 percent from the previous week but was up 3 percent from the same week a year ago. "Higher rates appeared to have a bigger impact on entry-level buyers, as the average purchase loan size increased to its highest level since June," said Fratantoni.

From "Mortgage Applications Tank 7.3 Percent Amid Rising Rates"
CNBC (09/21/16) Olick, Diana